Government

Attorney General Abbott shuts down real estate scam targeting Hispanic home buyers

Galindo Trust sold homes without disclosing liens; many consumers faced foreclosure

From the Office of Greg Abbott, Attorney General of Texas

June 23, 2006

AUSTIN – Attorney General Greg Abbott has obtained an emergency restraining order and asset freeze against an Austin business that systematically targeted Hispanic consumers by selling them homes without making important disclosures, including failing to reveal pre-existing liens.

Defendants Roberto Flores, real estate broker Richard Allen Small, Jr. and their company, Galindo Trust, are also accused of misrepresenting to consumers that tax and insurance payments were being made on their behalf, when in fact the defendants pocketed many of these funds. As a result of their scheme, numerous houses were placed in jeopardy of being foreclosed upon even though consumers had been diligent in making monthly payments. The homes are located on Galindo Street in east Austin.

“Homes are far and away the most important investment consumers make in their lifetimes,” said Attorney General Abbott. “It is unconscionable that unscrupulous businesses would line their pockets while causing consumers’ lifelong dreams of home ownership to degenerate into nightmares. I will take all necessary measures to hold these scam artists accountable and make certain they face the justice they deserve.”

According to the lawsuit filed under the Deceptive Trade Practices Act (DTPA), Flores allegedly told consumers that he was the “free and clear” owner of the homes he sold, but Galindo Trust was in fact still making payments on the same homes, which Flores and Small acquired in a mass purchase from Shriner’s Hospital. The lawsuit alleges that Flores never disclosed the pre-existing liens to most of the buyers. Shriner’s was not aware of the scam and is not a target of the Attorney General’s legal action.

The lawsuit also alleges Flores often told victims that the monthly payments included homeowners’ insurance premiums and property taxes. However, consumers eventually discovered that the defendants discontinued payments to insurers and the tax appraisal district, causing insurance policies to lapse and consumers to become delinquent on their property taxes. Furthermore, Flores assured consumers that payments for their homes would never change, but in fact payments increased as property taxes rose.

When some consumers who financed through Galindo Trust tried to sell their homes, they were unable to do so because of Shriner’s pre-existing lien on the properties. Only then did consumers learn that someone other than Flores had a legal claim on their homes.

Consumers’ problems grew when in 2004 the defendants ceased making payments to Shriner’s Hospital and instead pocketed the monthly payments consumers made to them, putting the homes at risk of foreclosure. Shriner’s is currently working individually with consumers to determine if they can be given title to their properties.

Galindo Trust operates primarily from an address at 307 East Croslin in Austin.

A court hearing to consider issuing a temporary injunction against the defendants is scheduled to take place in Travis County on Thursday, June 15, at which time the Office of the Attorney General will ask the court to uphold the terms of the emergency restraining order and asset freeze until a permanent final order is issued following trial.

Attorney General Abbott offers consumers the following tips when buying a home:

• Take your time. Be wary of sellers who pressure you to make an immediate decision to buy or sign documents.

• Review all documents very carefully before signing; take them to a trusted independent person, such as an attorney, to help you review the terms if there is something you don’t understand.

• Make sure a title search company is involved in the transaction to determine who the owner of the property is and whether there are liens or outstanding debts for which you could be held liable.

• Never make payments in cash. Use checks or money orders.

• If monthly payments to the seller or financing institution include homeowners’ insurance and property taxes, check periodically with your county tax assessor and with the insurance company to ensure that the accounts are current.

Consumers who believe they have been deceived in the purchase of real estate should report it to the Office of the Attorney General by calling 1-800-252-8011 or by filing a complaint online at www.oag.state.tx.us.